6-year High In Housing

Housing starts jumped 12.9 percent last year to the highest level in six years despite rising mortgage rates that cut into sales slightly in December.

The housing industry was hit by a 1 percent decline in December, but for the year, every region in the nation shared in the gains, the Commerce Department said Friday.

Construction of new single-family homes and apartments totaled 1.45 million last year, the most since ground was broken on 1.49 million units in 1988.

It was the latest evidence of a still-robust economy and strengthened analysts' convictions that the Federal Reserve will continue to raise interest rates to curb economic growth and arrest any inflationary trends.

"This was a classic confrontation between rising rates and a growing economy," said David Lereah, an economist with the Mortgage Bankers Association. "The economy was just too strong a component for rates to overcome."

Starts totaled 1.53 million at a seasonally adjusted annual rate in December, down from a revised 1.55 million in November, when unseasonably warm weather boosted construction throughout much of the nation. The November total originally was estimated at 1.54 million.

Most analysts had expected construction to slacken in 1994 as the Federal Reserve boosted interest rates six times in an attempt to keep inflation under control. Many economists expect it to raise rates again at a policy-making meeting Jan. 31-Feb. 1.

Thirty-year, fixed-rate mortgages topped 9 percent in December after starting the year below 7 percent. An increase from 7 percent to 9 percent would add $209 to the monthly payment on a $150,000 mortgage.

Still, the housing market remained healthy throughout the year. Analysts said the more expensive loan costs often were offset by a strong economy that increased jobs and incomes.

The 1994 advance in housing starts was the third straight annual gain.

The housing industry began its recovery from the last recession in 1992, when starts totaled 1.2 million. They rose to 1.29 million in 1993.